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» Unbundling the telco from Telco 2.0
The telecoms industry is torn between two forces: the desire to maintain control over every stage of production: retail, services, network delivery and user equipment. the reality of the Internet and open standards/open source forcing these things apar... [Read More]

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John Hagel had a post on his Edge Perspectives blog a couple of weeks ago that got me thinking further about a point I make in one of the classes I teach in international market selection and development, i.e. the [Read More]

Comments

Craig Maginness

Thanks for another insightful post on this subject. I frequently refer to your work in a course I teach on export market identification, entry and development because, while this is an important question for any business to answer, I believe it is critical to maximizing the chances for success when the challenge is to replicate your business in a different cultural context. When planning for business expansion into a foreign market with different norms for relationship building and inconsistent levels of infrastructure development, it is critical to know going in whether the success of the business model is dependent upon being very good at infrastructure management or at creating and sustaining customer relationships.

Maciej Baranski

Interesting article. Not sure if you are aware, but here in the UK a couple of food retailers, Tesco and Sainsbury's have quite successfully implemented loyalty programmes based around collecting points by using magnetic cards at the checkout. In the case of Tesco, every few hundred/thousand points you collect you can redeem for in-store discounts. They also send money off coupons to your home address for products based on your spending patterns on a regular basis. Personally, I use Sainsbury's programme, which also includes many other retailers both high street and online for collecting and spending points. However, I'm not aware of any overt use of the information they collect on my spending.

Otherwise, I'm not sure how you could build strong customer relationships in an off-line retail environment. Don't think many people would be interested in filling in a form giving their personal details in every shop they went to. Also, modern populations are very mobile and one-to-one relationships are more difficult to maintain, even in social lives.

Cheers

James Taylor

Great post. I think physical retailers underestimate how much more attention they could give to the customers who come to each store and how they could flex those stores to be more customer-responsive. When I read the Long Tail I thought that it underestimated what a physical retailer can do.

Raimo van der Klein

Hi John, just added a presentation on slideshare about the subject:
http://www.slideshare.net/Thinkmobile/value-chain-reshuffle

Raimo van der Klein

Hi John, thanks for sharing this post. This is something I have been feeling. The increased transparancy, openness and technology speed -up this process. I made a slideset whiches I removed from Slideshare about large scale and small scale companies. I stated that large scale companies are going to be pushed down the valuechain. Who says there is no margin there? Maybe you would like my slideset about 3D Value Chains. I recommend companies to split up the valuechain in recognizable functions and choose wisely the functions they can run effecient and then open up that function and focus on adding value.. You can find it here. I would a love to get your thought on it.
http://www.slideshare.net/Thinkmobile/3d-valuechains

Thanks again. I love the three business segments..That helps me alot..

djysrv

Airlines are interesting examples of firms that do keep track of profitability by customer. Why else would they promote "business class" seating for international flights?

However, at the commodity pricing level, e.g., deeply discounted airline travel, the industry has a lot in common with retailing. The mantra for this business model is "if it is not self-service don't bother."

Here's a case in point. large supermarkets offer a "service deli." Guess what, in most cases the employees behind the counter are so busy with the logistics of keeping the place running they don't wait on customers. Same goes for instore pharmacies where a pharmacist struggles to fill phoned in orders and a clerk scurries around stocking shelves and doing inventory.

The airline industry operates the same way. Coach class customers are shuffled through a system running at the edges of its capabilities. When a flight is cancelled there is no surplus capacity to absorb people, e.g., no extra space on planes, and, interestingly, no extra capacity in terms of "customer service" staffing in the terminal. Like the supermarket you are on your own.

What's the airline industry and the supermarket have in common is that both have calculated the value per customer at the low end and decided it isn't worth it to bother with customer service. The margins aren't there.

The cost of replacing a customer who stops shopping at a store, or flying on an airline, is small. Also, they know you will be back because the business model is based on pricing.

I think customer attention as a value proposition will only continue to be something pursued where the profit margin is high enough to justify the investment in support staffing including market research. Examples include diamonds, four star restaurants/resorts (Las Vegas), and high end cars (Lexus, BMW, etc.)

Chao Lam

What about Apple (ex-Computer)? It's clearly a "product innovation and commercialization" company, but it also, against conventional wisdom, managed to create a vast retail operation that is still growing rapidly?

Does this pattern also predict that they will ultimately fail by being both a product and retail operations company?

Ben Rodenhaeuser

I wonder whether the Gap isn't an example of a broader trend in retail (rather than an exception) - at least in Europe. Both H&M and Zara are extremely succesful in the european fashion retail market - both combine customer relationship and product innovation/commercialization (and infrastructure, of course). Indeed, both control their complete value chain. Both are extremely fashion trends oriented.

And isn't apple another example of a company that has been highly succesful by adding an infrastructure business (apple stores and apple online store) to its product business?


Kevin Hillstrom

In the world of the retail blogosphere, this is an absolute exception to the content we usually read.

Thoughtful, strategic, theoretical, and brilliant. While I don't agree with all of it, I'll read this over and over, because you dug into a topic and provided a unique perspective that goes beyond the "Gap needs to rebuild their brand" stuff that inundates the blogosphere.

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